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Summary:

Now that AOL has been spun off from Time-Warner, it can write a new chapter for itself. If AOL does several key things right, it has a chance of being successful again. We look at some opportunities, along with the risks each one entails.

As the first decade of this century comes to a close, many of us are looking back and, depending on our experiences, celebrating the good fortune the last 10 years have brought or simply shaking our heads and preparing to move on. If you’re in the latter camp, cheer up. You probably didn’t have it as bad as AOL.

America Online stood at the center of the fledgling online world in 2001 when Time-Warner paid $156 billion in stock for it, a deal now considered the worst of the decade, if not of all time. Over the years, revenue deteriorated while net losses came and went. One waggish analyst put it well when he called the merger “a nine-year adventure akin to a marathon through the mud.”

But that’s all history now. AOL is an independent company trying to write a new chapter in its history. It received (yet another) new CEO in Tim Armstrong in March and, as of this week, a brand-new board that includes such veterans as VC Bill Hambrecht and Richard Dalzell, Amazon’s former CIO. It also has longstanding ties with big advertisers and a growing stable of seasoned writers on its blog network.

So while the coverage of this week’s spinoff from Time-Warner has focused on AOL’s wretched decade and its daunting prospects for the future, there are reasons to think that, if it does several key things right, the company has at least a chance of being successful again. Nowhere near as successful as it was in the 90s, but successful as in an online media company with modest profit growth.

Here are some opportunities, along with the risks each entails.

1. Become a leader in web content.

Why it might work. The operative meme here seems to be the “Time Inc. of the 21st Century.” From business site Daily Finance to many other properties celebrity gadfly TMZ, AOL employs 500 full-time journalists and 3,000 freelancers. That could be a sturdy platform for ads once spending recovers.

Why it might not. Web portals have always shunned original content as too costly and risky. Yahoo’s experiments have been mixed at best. What’s more, online advertising is in a state of painful flux, with no clear business model for future growth.

2. Exploit the Google-Bing rivalry.

Why it might work. Because Microsoft hates Google so much, and there are fewer ways to deliver Google a big bruise than to steal away AOL.

Why it might not. Google may bail anyway. The arrangement, which is set to expire in a year, may not have been as lucrative as Google was hoping.

3. Refurbish the brand.

Why it might work. The brand value really has nowhere to go but up. If Time Inc. has long been a valued name in news, AOL will need to become synonymous with quality content.

Why it might not. AOL’s new branding effort is off to a lame start. Also, most of its blogs aren’t perceived as AOL sites. How many TMZ readers know it’s affiliated with AOL?

4. Go mobile.

Why it might work. The market for mobile ads is still nascent and developing, with no clear leaders yet dominating it.

Why it might not. The company is hardly visible in the mobile web. Of two interviews I saw with Tim Armstrong last week, he only mentioned the mobile space once –- and it was just in passing.

It’s nearly impossible to overstate the challenges that still face AOL. It must execute on many of these risky initiatives while undergoing a wrenching and costly turnaround (restructuring costs will reach $283 million), repay debt (AOL said Friday it received a one-year $250 million credit facility from Bank of America) while placating investors with strong financials.

AOL’s path to relevance is clear. The only problem is, the path is one that very few companies could ever navigate.

  1. fyi: TMZ is no longer part of AOL.

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  2. AOL’s path to relevance is clear. The only problem is, the path is one that very few companies could ever navigate.

    This is terrible writing. You just laid out 4 options and noted with each one that the prospects of success are poor. What is the clear path to relevance?

    And there’s a remaining reference to TMZ at point 3.

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  3. Um, doesn’t AOL want to be a big player in ad serving? Isn’t that what all the hubbub about Platform A was about? That might be a priorityhb that you should analyze.

    Refurbishing the brand and getting someone to re-up on a paid search partnership don’t really count as strategies in my book.

    The only other real strategic path mentioned here is the content one, which I think makes sense since the ad market will rebound with the economy at some point. Unfortunately, the only new part of their content strategy I can recall is those awful-sounding cartoons with Warren Buffett and Oprah. Are they still putting those out? If that’s indicative of the content strategy, I’m not holding my breath for an AOL comeback.

    I do still have to give AOL props for the best exit ever when they sold out to Time Warner. The only one that comes close is when Guidant sold to Boston Scientific right before all those defibrillator problems came out. Ok, and number three is probably those guys from TheGlobe.com. Those were the glory days!

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  4. [...] The case for an AOL (AOL) renaissance.  (GigaOM) [...]

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  5. AOL lost its center years ago, during its growth spurt. The problems it has now spun off the decisions it made then. It needed to simplify itself. Instead, it made itself more complicated. It holds its customer base through its having projecting itself as a safe place to be. But reality has been eroding perceptions about its haven-like nature for a while. Users who’ve stayed with AOL and still trust it, seem, in my small personal experience, to be slow to adopt innovation, and resistant to change. If AOL could identify niches that show small upward trends in revenue, and edit itself mercilessly to make more room for those trends to expand while sloughing off dead stuff, it might have a chance to find some real viability. But such an approach would have to be managed with great sensitivity, so as to continue to carry along the many users who are still on board, whose persistence in using AOL, and being vocal in their satisfaction with it, buoy AOL’s credibility.

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  6. It would have been helpful for the author to get his facts straight. Time Warner did not pay $156 billion for America Online; just the opposite – AOL purchased Time Warner. http://money.cnn.com/2000/01/10/deals/aol_warner/

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  7. History is not on their side. Can you quickly name another brand that faded from such ubiquity and then later bounced back to prominent and relevance again? Particularly those that either just failed to innovate or tried a famously ill-conceived business strategy.

    After an hour I think I came up with only a half dozen. None in the media industry.

    And most of the special cases I came up either had to wait decades for their brand resurrection, or had to come back, reincarnated and reinvented as a new brand, in a completely new category.

    It’ll be interesting to see if AOL – er sorry, Aol, can pull it off (as well as Yahoo, MySpace, Napster, Pointcast ….)

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    1. There’s a company you may have heard of in Cupertino, CA, that meets your criteria pretty well. (Also IBM.)

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  8. [...] The Case for an AOL Renaissance (gigaom.com) [...]

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